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Industry pain abounds as electric car demand hits slowdown
Published by Jessica Weisman-Pitts
Posted on January 30, 2024
4 min readLast updated: January 31, 2026
Global Banking & Finance Review®
Company
Published by Jessica Weisman-Pitts
Posted on January 30, 2024
4 min readLast updated: January 31, 2026
By Nick Carey and Joseph White
(Reuters) – While automakers and suppliers are betting big on future demand for electric vehicles, a near-term global slowdown is causing pain, including bankruptcies, scrapped initial public offerings and production cuts.
Investment in capacity and technology development has outrun actual EV demand, boosting pressure on companies to cut costs.
“It’s true, the pace of EV growth has slowed, which has created some uncertainty. We will build to demand,” General Motors CEO Mary Barra said on an earnings call Tuesday.
GM previously cut EV production targets due to the slowing demand, but Barra told analysts GM was “encouraged” by industry forecasts that EV sales in the United States are forecast to rise at least 10% this year from about 7% in 2023.
Ford also previously cut EV production due to a growth rate that is rising more slowly than previously expected.
Tesla CEO Elon Musk underscored the near-term struggles, warning last week of a sharp slowdown in sales growth this year. With margins falling amid price cuts, shareholders erased $80 billion from Tesla’s stock valuation the following day.
“There’s no doubt that the limitations – EV charging and the lack of battery resiliency at low temperatures – are causing consumer anxiety,” said Tim Piechowski, portfolio manager with ACR Alpine Capital Research, which owns GM shares.
“The reality is that the adoption curve will be slower and there will be pushback to regulators about fuel economy,” he added. “It’ll just be a longer ramp than perhaps was initially anticipated.”
That slower pace was underscored this month as companies pull back on prior plans.
On Monday, France’s Renault ditched plans to list its EV business Ampere because of sluggish stock market conditions. The company had said the IPO could be worth up to 10 billion euros.
MUDDY WATERS FOR THE ECONOMY
Suppliers are affected, too.
China’s CATL on Tuesday forecast 2023 profit growth sharply lower than the previous year as it grappled with slowing demand and stiff competition.
CATL, the world’s largest EV battery maker, faces challenges from smaller rivals and slowing demand in China, the largest EV market.
China’s second-ranked EV battery maker BYD on Monday forecast its 2023 net profit rose at a far slower pace than 2022, while last week Korean battery maker LG Energy Solution predicted slowing growth in the global EV market this year.
“Global EV momentum is stalling. The market is over-supplied vs demand,” Morgan Stanley analyst Adam Jonas said in a recent research note.
Albemarle, the world’s largest producer of key EV battery material lithium, said this month it was cutting jobs and capital spending in response to slipping prices. A report put the job cuts at 4% of its workforce.
Meanwhile, German EV sales, including plug-in hybrid models, fell 16% last year and are forecast to drop another 9% in 2024, including a 14% decline for pure battery EVs, according to German auto association VDA.
“Subsidies have run out and at the same time, we are in muddy waters across the economy. Consumers’ propensity to buy is not particularly pronounced,” VDA chief economist Manuel Kallweit said.
Still, German production of EVs is forecast to increase by 19% this year to 1.45 million, with much of the output destined for export, VDA said.
EV demand in Europe has weakened and the region’s carmakers face competition from Chinese rivals. Those feeling the pain hardest in the sector seem to be the EV startups.
Britain’s Arrival on Monday said it received a delisting and stock trading suspension notice from the Nasdaq. Lordstown Motors, Proterra and Sweden’s Volta Trucks have gone bankrupt as a tough economy weighs on demand and hinders access to capital.
Polestar last week said it planned to cut about 15% of its workforce, or 450 people, due to the challenging market.
The long-term is where automakers are placing their bets with EVs, even as they still benefit from strong demand for internal-combustion engine (ICE)-powered vehicles.
“We know the EV market is not going to grow linearly,” GM CFO Paul Jacobson said Tuesday. “We are prepared to flex between ICE and EV production.”
(Reporting by Nick Carey in London and Joseph White in Detroit, additional reporting by Victoria Waldersee in Berlin and Ilona Wissenbach in Frankfurt, writing by Ben Klayman; Editing by Nick Zieminski and David Ljunggren)
Electric vehicle demand refers to the consumer interest and market need for electric cars, which has been influenced by factors such as technology, pricing, and environmental concerns.
An initial public offering (IPO) is the process through which a private company offers its shares to the public for the first time, allowing it to raise capital from public investors.
Production cuts refer to a reduction in the quantity of goods produced by a company, often implemented in response to decreased demand or economic challenges.
Market over-supply occurs when the supply of a product exceeds the demand for it, leading to potential price drops and financial strain on producers.
Consumer anxiety regarding electric vehicles often stems from concerns about charging infrastructure, battery performance, and overall reliability compared to traditional vehicles.
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